Trade School Bent Rules To Get Aid, Officials Say

By KAREN W. ARENSON

Published: July 23, 2007

Robert A. Berger was not well known as an educator. But as the operator of a small New York City trade school near Pennsylvania Station, he achieved a certain notoriety among federal regulators.

For years, they tried to limit his access to the federal financial aid that is the lifeblood of so many colleges and vocational schools. They challenged him over the large numbers of students defaulting on federal loans and the school's failure to submit timely and complete financial information. Every time, he fought back.

The decade-long tale shows the difficulties in policing trade schools even as enrollments are booming. Regulation is decentralized, involving both federal and state monitors and independent accrediting agencies, and a problem school can keep enrolling students for years.

After Mr. Berger's school, the American Center for Career Training, lost its accreditation and access to federal aid in 2002, he reopened it under a new name, Roberts Business Institute -- in the same place with the same teachers and students -- and applied again for money. Federal officials characterized the change as an attempt to get around regulations.

And as he waited for approval, Roberts officials filled in names of other universities -- the University of Iowa, the University of Phoenix -- on their students' financial aid forms, according to complaints filed with the state. Mr. Berger declined to respond to most questions, and his lawyer did not return calls.

Johanna Duncan-Poitier, senior deputy education commissioner for New York State, which eventually began its own inquiry, said, ''This was a school that promised students financial aid that they were not eligible to receive.''

Now, more than a year after Mr. Berger abruptly closed up shop, New York says it is still owed more than $2 million in student aid that his schools were not entitled to.

Schools are easy to open, but approval from a recognized accrediting agency is necessary to get the federal grants and loans necessary for many low-income students who are attracted to trade schools.

While the federal Education Department can cut off funding, it does not close colleges. It relies on independent accreditors that it approves to verify a school's quality. States also license vocational schools, but they have varying standards. And there is no central list of problem operators.

''People go work for one company. It gets in trouble. They go work for another,'' said Mark Kleiman, a California lawyer who has represented students in lawsuits against trade schools. ''In health care,'' he added, ''there is a national practitioner database, and it is possible to see where the bad apples are going. In education, there is nothing remotely like it.''

Cases like Mr. Berger's have cropped up around the country. The Business Career Training Institute, a vocational school in Washington and Oregon, survived for years -- and drew millions in aid before it closed in 2005 -- despite student complaints and federal criticism. It recently agreed to a $13 million class-action settlement with students in a county court in Tacoma, Wash.

Computer Learning Centers, which operated schools in 11 states, survived for years in the face of lawsuits by students and charges by Illinois and Maryland officials that it was not meeting standards. It shut down and filed for bankruptcy in 2001, facing demands that it repay $187 million in federal student aid.

Mr. Berger's case was small by comparison, but e-mail messages that federal regulators wrote to one another -- obtained through the Freedom of Information Act -- show that they considered him audacious. One characterized him as a man ''who seems willing to do just about anything.''

Mr. Berger started in career education two decades ago, when he bought the Travel Institute, near City Hall. He moved the school uptown and, in 1998, changed its name to the American Center for Career Training, offering classes in subjects like medical billing and office computers.

Students like Yolanda Mercado of the Bronx, a housekeeper with hopes of a better-paying career, said they never landed the jobs the school had promised. Some students were on welfare, recruited through fliers distributed at a public assistance office in the Bronx.

By 2002, the last year the American Center was eligible for federal aid, it had nearly 400 students and $2.4 million in annual revenues -- $772,000 from federal Pell grants to low-income students, and most of the rest from New York's student aid program, according to information from the company and the State Education Department.

There were warning signs. As early as 1995, the federal Education Department said the school was getting more money than it should and was not properly documenting that students were eligible for subsidized loans.

In 1997, the department tried to cancel the school's participation in the federal loan program because more than 40 percent of its students had defaulted -- an indication that they were not finding decent-paying jobs. Mr. Berger contested the default rate, and his school remained in the program.